Chapter 7 vs. Chapter 13 Bankruptcy

Most people file for Chpater 7 bankruptcy for one simple reason: to wipe out all of their dischargeable debts. But there are several reasons some individuals chose to file Chapter 13 instead of Chapter 7 bankruptcy. Following are some of these reasons:

• All nonexempt property is liquidated under Chapter 7 bankruptcy (e.g. most equity on your home, expensive clothing, etc.). If you have valuable nonexempt property that you wish to keep, then filing under Chapter 13 is the better option.

• Under Chapter 7, if you are behind on your car payments, you either have the option of paying off the loan in full or give up the vehicle. Under Chapter 13, on the other hand, you can keep your vehicle and make the payments under the reorganized payments plan.

• If an individual who is seeking to file bankruptcy, has filed for bankruptcy in the last 6 years, he must file Chapter 13 instead of Chapter 7 bankruptcy.

• Under Chapter 7, creditors can go after your cosigner to recover your debts. This consequence is avoided under Chapter 13.

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